Financial Reality Revisited

Paul Krugman Makes Housing Call He Will Likely Come to Regret « naked capitalism

noreply@blogger.com (Chris) — Wed, 25 Jan 2012 03:04:00 +0000

Paul Krugman Makes Housing Call He Will Likely Come to Regret « naked capitalism

Thanks NC Readers! Tom Miller Says No Mortgage Deal Imminent « naked capitalism

noreply@blogger.com (Chris) — Wed, 25 Jan 2012 02:44:00 +0000

Thanks NC Readers! Tom Miller Says No Mortgage Deal Imminent « naked capitalism

Hazard Insurance With Its Own Perils - Fair Game - NYTimes.com

noreply@blogger.com (Chris) — Mon, 23 Jan 2012 08:32:00 +0000

Hazard Insurance With Its Own Perils - Fair Game - NYTimes.com

Why Did Banks Give Home Loans to People Who They KNEW Couldn’t Pay? - Washington's Blog

noreply@blogger.com (Chris) — Thu, 19 Jan 2012 11:58:00 +0000

Why Did Banks Give Home Loans to People Who They KNEW Couldn’t Pay? - Washington's Blog

"The FBI Estimates That 80 Percent Of All Mortgage Fraud Involves Collaboration Or Collusion By Industry Insiders"

noreply@blogger.com (Chris) — Thu, 19 Jan 2012 11:52:00 +0000

"The FBI Estimates That 80 Percent Of All Mortgage Fraud Involves Collaboration Or Collusion By Industry Insiders"

Insane Levels of Leverage by the Too Big to Fail Banks - Not Deadbeat Borrowers - Caused the Financial Crisis

noreply@blogger.com (Chris) — Thu, 19 Jan 2012 11:51:00 +0000

Insane Levels of Leverage by the Too Big to Fail Banks - Not Deadbeat Borrowers - Caused the Financial Crisis

Class Action Lawsuit Alleges JP Morgan Engaged in Systematic Document Fabrication to Move Mortgage Losses from Its Books into Mortgage Backed Securities « naked capitalism

noreply@blogger.com (Chris) — Thu, 19 Jan 2012 11:34:00 +0000

Class Action Lawsuit Alleges JP Morgan Engaged in Systematic Document Fabrication to Move Mortgage Losses from Its Books into Mortgage Backed Securities « naked capitalism

This story of the banking criminal activity just continues to unfold and it is becoming more and more unbelievable as the evidence to support massive bank fraud and criminal activity is finally seeing the light of day. In that sense the story is playing out just as most people who knew the truth thought it would play out. What is the truth? The truth is that banks have egregiously committed fraud and other criminal activity for their own gain and to try and purposefully break the law and beat the system. The real crazy thing is that the government seems to be okay with the massive lies and law breaking that has been going on by the major bank players. It is disgusting and appalling to see the government try to brush such a massive abuse of the American taxpayer under the rug for the sake of political gain. It is becoming more and more clear every day that the banking industry screwed just about every home owner in the country to some degree and they knew they were doing it. Now we are seeing why they felt no shame in doing so as they have gotten away with what could be seen as the banking industry's rendition of the prefect murder. However, it is only perfect because the politicians and current administration are in the tank for the too big to fail banks. It is a shame that the failure of our "democracy" has to be revealed with the systematic wiping out of trillions of dollars of wealth.

taken from story on Naked Capitalism.com

We’ve reported repeatedly of widespread evidence of grotesque procedural abuses as servicers and foreclosure mill lawyers try to cover up for the fact that in many cases, mortgage notes were not transferred properly to securitization trusts, and the rigid way these deals were structured makes it impossible to remedy those failures at this juncture. Absent creating a time machine, the only fix is to fabricate documents that make it appear than things were done correctly. We’ve seen (as in in person) obvious forgeries submitted to the court (signatures obviously Photoshop shrunk to fit) and servicer personnel caught perjuring themselves, yet judges are remarkably unwilling to issue a ruling that hinges on finding that the plaintiff filed phony documents.
If this case moves forward, that reticence may change. Note that this case, which covers only the Central District of California, alleges that Chase engaged in over 7000 filings of motions of relief of stay in bankruptcy court using fabricated documents. Remember that filing for bankruptcy puts a “stay” or hold, on all creditor claims. They all go wait while the court determines which creditors get what from the under water borrower. A “motion for relief of stay” by a mortgage lender is tantamount to saying, “Judge, let me grab the house.” Motions for relief of stay are typically a costly nuisance for bankruptcy lawyers. It wastes the borrower’s scarce money to shoo them away (and some plaintiffs’ lawyers will take advantage of inexperienced bankruptcy lawyers by getting them to sign a waiver in return for dropping the motion for relief of stay that looks innocuous but has a paragraph in it changes the burden of proof from the bank to the borrower, which almost always puts them at a fatal disadvantage and results in the loss of the home).

Full Article By Michael Olenick, founder and CEO of Legalprise on shadow housing inventory

noreply@blogger.com (Chris) — Sun, 15 Jan 2012 14:16:00 +0000

By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha). You can follow him on Twitter at @michael_olenick“Shadow inventory,” the number of homes that are either in foreclosure or are likely to end up in foreclosure, creates substantial but hidden pressure on housing prices and potential losses to banks and investors. This is a critical figure for policymakers and financial services industry executives, since if the number is manageable, that means waiting for the market to digest the overhang might not be such a terrible option. But if shadow inventory is large, housing prices have a good bit further to go before they hit bottom, which has dire consequences for communities, homeowners, and the broader economy.
Yet estimates of shadow inventory, and even the definition of what constitutes shadow inventory property, vary widely. For example, the Wall Street Journal published a Nov. 11, 2011 article, “How Many Homes Are In Trouble?” where values varied from 1.6 million (CoreLogic), to “about 3 million” (Barclays Capital), to 4 million (LPS Applied Analytic), to 4.3 million (Capital Economics), to LPS Applied Analytics, to between 8.2 million and 10.3 million (Laurie Goodman, Amherst Securities).
Why do these numbers vary so much? Even though CoreLogic is generally considered to have one of the best databases of loans, its estimates of loan performance and odds of default are based on credit scores, which is a badly lagging indicator. Laurie Goodman is seen by many as having the most carefully though out model, even though industry insiders are keen to attack her bearsish-looking forecast.
I have a large database of my own, and am familiar with housing and mortgage information sources. I’ve come up with my own tally of shadow inventory and have also tried to analyze — OK — take a stab at – what I call “shadow liability,” meaning the amount of money taxpayers, investors, banks, will be lose if those homes are liquidated. Assumptions using those terms are also in the attached spreadsheet. My analysis comes up with a total close to that of Goodman’s range, 9.8 million using a narrower definition than Goodman’s of what constitutes shadow inventory.
Put more simply, things are actually worse than any of the prevailing estimates indicates, although Goodman is very close to the mark. Current loss experience suggests that this figure is staggering, easily in the $1 trillion range.
Why aren’t those losses more visible yet? Well, evidence suggests that servicers are stalling the foreclosure process, not taking title to and selling these houses. For the lenders, such delay likely allows them avoid the write-offs of both the negative equity as well as the worthless second liens. More generally, it keeps the trillion dollar losses hidden. Lenders aren’t acknowledging their stall tactics, however. When people notice how slowly foreclosures are progressing from initial steps to resale, lenders point at their foreclosure fraud related dysfunction. Lenders conveniently don’t mention that such dysfunction was self-induced, instead blaming borrowers and courts.
My MethodologyMy data comes from several sources. Default information is from the October, 2011 LPS Mortgage Monitor. Housing information, including the number of houses with mortgages, comes from the US 2010 US Census and the 2009 Statistical Abstract. Median home prices — the likely value of the loans that are either in foreclosure or will be soon, is from the FHFA; specifically the Q2, 2006 state-by-state median home prices, when many of the bubble loans were written. Note: these prices are used to approximate the principal value of the loans, not what the properties are currently worth.
Because not all this data overlaps entirely some extrapolation was necessary; when required to extrapolate I tried to do so conservatively. An example is how I arrived at the number of mortgages in the US, a step on the way to calculating the number of mortgages in default.
The first step was figuring out how many housing units with residential mortgages America has. According to the 2010 census, America is home to 131.7 million housing units. Of these, 76.4 million are owner-occupied, 37.5 million are rental units, and the remaining 17.2 million are vacant, and the remaining 600K are houseboats or other exotic housing. Of the 37.5 million rentals, some are in apartment buildings that would be financed with commercial mortgages, not residential ones. Commercial loans are structured differently than residential loans, and are easier to renegotiate, so they I’ve excluded from this analysis.
To be conservative—to exclude more loans as commercial than actually are, rather than risk leaving commercial loans in the analysis—I’ve assumed that any building with 5 or more housing units is in a building that either has a commercial loan or no mortgage at all.
According to the National Multi-Housing Council, using 2011 Census data, has determined that nationally, 42% of renters live in buildings with 5 or more units. Applying that percentage to the 37.5 million rental units, and subtracting that from total renters, I end up with 21.8 million rental housing units that could have residential mortgages.
In total, then, I have 76.4 million owner-occupied homes, 21.8 million residential rental units, 17.2 million vacant homes (which includes, among other things, vacation homes and abandoned ones) and 16.3 million other, mainly units in commercial properties. All in all I end up with just over 115 million homes that could have a residential mortgage on them. But how many of them? Well, the Census reports that in 2010, 68% of owner-occupied units had at least one mortgage. I used this same 68% for investment (residential rental) properties and vacant (primarily vacation and abandoned single family homes) properties.
I believe this 68% figure is appropriate for two reasons. First, a person who has a mortgage on their own home is unlike to buy a vacation house or an investment property with cash. Indeed, even a homeowner living free and clear in their own home might need a mortgage to buy second property. So assuming the mortgage rate for investment and vacation homes is the same as owner occupied surely understates the number of mortgages. Second, the mortgage rate on abandoned homes surely is nearly 100%; why abandon a home if it’s not in foreclosure?
Using that math, I came up with 78.6 million mortgaged properties. This figure is substantially higher than many other estimates, including Goodman’s Amherst study, though the likely reason is that the census data the analysis relies upon is relatively new. Goodman’s study uses 53.7 million mortgaged homes, though the census reports 52.2 million owner-occupied loans alone, in additional to rental properties, mobile homes, and vacant properties. Given that the census cost $13 billion to produce — an amount no private organization could afford — and 2010 results were not available at this level of granularity until relatively recently, I would not be surprised to see upward revisions to other base housing unit figures in the future.
To estimate shadow inventory, I used the delinquency data from LPS Analytics. They add up loans that are delinquent, loans that are in foreclosure, then come up with a state-by-state percentage of “non-current” — loans that are, or are likely, to end up in foreclosure. There is some ambiguity in LPS’ figures; specifically the definition of “delinquent,” and whether they are counting homes or loans.
To illustrate a potential problem with these assumptions, let’s take a theoretical example of 100 houses. Let’s assume 68% have mortgages, a figure from the census, so 68 houses have mortgages. Then let’s assume these homes are in FL and 22.9%, or 23 houses, are either in foreclosure or likely to end up there soon. I’m assuming this means that 45 houses are current, 23 houses in trouble, and 32 houses paid-off, though I concede that it could mean 12 houses with two mortgages are in trouble, 32 are paid off, and 56 are fine.
This methodology differs from Goodman’s, which relies upon predicting both likely defaults and re-defaults for non-sustainable modifications, as well as a small number of homes likely to strategically default as liquidations begin and home value plummets. Conversely, my model assumes all 90-day delinquent loans will result in foreclosure and liquidation — and I’ve yet to see enough good-faith modifications to assume otherwise — whereas Amherst’s believes the figure is likely to be 80-90%. However, I do not allow for strategic defaults, which more than offsets my skeptical assessment of the mortgage mods now begin offered (my assumption is that when people default suddenly, it is really an anticipatory default: the borrower could see he was going to hit the wall, but defaulted before he was completely broke. Given the job market costs of having a foreclosure or bankruptcy on your credit record, I don’t regard that as a bad assumption). Goodman has three buckets of current loans that she anticipates will produce defaults: badly underwater loans (loan to value ratios of over 120%), moderately underwater loans (LTVs of 100% to 120%) and loans with equity borrowers will default upon anyway (LTVs less than 100%). She estimated those three groups would produce eventual foreclosures of 2.8 to 3.7 million of her total. Thus my somewhat smaller tally is actually more dire, because it consists of borrowers who are having trouble making payments now, as opposed to borrowers who are anticipated to default at some undetermined point in the future.
That being said, except for the lower housing unit loan base Goodman’s analysis seems rock-solid, though it would mushroom if used with my higher base housing unit figures and more pessimistic view of servicer’s ability to mitigate defaults. Together they would paint a devastating picture of the future, so I won’t try to reconcile them .. at least not yet.
Using the assumptions above, and applying the LPS data state-by-state, there are 9,800,000 houses in shadow inventory.
If these loans were taken out for the median value of a state-by-state home price, using data from the FHFA, for Q2, 2006, there is $2.3 trillion of home values at near the market peak. The mortgage balances are going to be lower than that, but given how widespread equity extraction came to be (and it is probably that the most levered homes are hitting the wall), it is not unreasonable to assume LTV ratios relative to peak values of 80%. Loss severities on prime mortgages are running at roughly 50% and are 70% on subprime (note that with more borrowers fighting foreclosures, and given that loss severities on a contested foreclosure can come in at 200% or even higher, so using these assumption is certain to understate actual results). $2.3 trillion x 80% x 50% = $900 billion.
These losses will be distributed across the GSEs (meaning taxpayers), banks that have second liens (with the biggest losers being Bank of America, Citibank, JP Morgan, and Wells Fargo), investors in private label (non GSE) mortgage securities, and other US and foreign banks. Balanced against this liability is some amount figure for the underlying asset, the house. Given that servicer advances, foreclosure costs and servicer fees come close to and even exceed the value of the property, comparatively little of this $2.3 trillion will be recovered in property liquidations.
It is unclear where the money from these write-offs will come from, or whether they losses have been adequately budgeted. Obvious sources are Fannie Mae, Freddie Mac, European and US banks, none of which have reported anywhere near this level of reserves. We know that the Federal Reserve has been buying up MBS and related instruments in bulk; maybe the central bank plans to print more money to cover the losses and enable the foreclosures. Printing this much money, for this purpose, in this political environment, in secret, seems unlikely.
In support of the conclusion that banks cannot afford to recognize this shadow liability is the sharp decrease of foreclosure filings in 2011 and the seeming unwillingness of banks to move foreclosures through the system. They file foreclosures, then let them linger, not taking homes even when every possible borrower defense is exhausted. Some of this slowdown may be due to more scrutiny of foreclosure documentation, particularly in judicial foreclosure states, but there is clearly more at work. In the most obvious example, servicers are reluctance of banks to take title to the homes after obtaining a judgment; even after the judgment is a year old and cannot be challenged.
For example, filing volume in Palm Beach County, FL, started to increase towards the end of 2010 but judgments remained flat and certificates of title — where a bank actually takes title to a house, recognizing the underlying financial loss and evicting the family — actually slowed down despite an enormous backlog of judgments. This contrasts to the banks incessant complaints of a broken court system, because a judgment more than one year old in FL cannot be challenged for fraud. This leads to the conclusion that it is the banks — who are unwilling or unable to absorb the losses — rather than the courts or homeowners that are actually slowing down liquidations.
Let’s walk through these figures. In Palm Beach County, the number of Certificates of Title issued for Q1-4, 2011, was 1,594, 1,886, 1,413, and 1,299 respectively; the number of judgments was 289, 480, 281, and 367 respectively. Let’s compare that to 2010, when there were 3,105, 9,704, 7,259, 1,033 judgments in Q1-4 respectively and 1,534, 2,207, 3,065, and 2,738 titles transferred.
Many of these cases are uncontested; yet it is not uncommon in foreclosure court to see bank lawyers arguing vehemently for delays with nobody on the other side.
Let’s review more figures: in Palm Beach County there are 10,794 more final judgments of foreclosure that are at least a year old than there are certificates of title issued. Again, there is nothing anybody can do to challenge a judgment after one year. Servicers appear to be milking ongoing costs and fees from investors. Cross-referencing that to a softer data point I’m reminded of a worker, in my home state of FL, sent by a company I hired to perform a home repair. He’s a young man who said he purchased a condo, lost a prior job that paid better, and stopped paying for his condo for which, he noted, similar models were selling for at a 80% discount to what he owed. He filed no defense to his foreclosure whatsoever — he was positively clueless about the judicial system and did not hire a lawyer — but he ran to his truck to show me a Notice of Voluntary Dismissal of his foreclosure, asking what it meant. It’s clear that while some homeowners do their best to avoid the auction block, even those who do nothing all have a statistically good chance of staying put.
There is other anecdotal evidence suggesting banks do not want these houses or, more accurately, do not want the write-offs that actually taking the houses would force:
• Foreclosure defense lawyers have clients who have not paid their mortgage in years, but face neither a foreclosure nor even a negative mark on their credit report. I recently received a call from a man who said he had not paid his $1.6 million mortgage in two years but his servicer has not foreclosed, and he faces no derogatory information on his credit report; he was frustrated because he is retired and just wants to move to a cottage. This phenomenon, which apparently isn’t rare, might explain why shadow inventory reports that rely on credit reports to extrapolate shadow inventory are often dramatically lower than these calculations.
• Every year the Republican dominated Florida legislature introduces legislation to speed along foreclosures, and every year the legislation fails. I personally believe this legislation to be both immoral and arguably illegal. However, it is impossible to believe this bank beholden governmental body is willing to repeatedly bite the hand that feeds them .. unless their master makes it quietly clear that they do not actually wish to accelerate liquidations but cannot publicly admit as much.
• It is common for foreclosure mill lawyers to argue for delays in selling a home when nobody is representing a borrower. Judges, who want to clear their dockets, will rail at bank lawyers about the age of the case even while bank lawyers argue for yet another delay, while the other table — where the borrower, the defendant, is supposed to sit — is empty.
• Bank-instituted delay tactics are not limited to Florida. Not long ago I spent the day with Sean O’Toole, CEO of foreclosureradar.com. Sean knows the foreclosure world and his data is, literally, the best in the Western states he covers. He noted the same effect in CA; lender-initiated delay after delay after delay selling a home. In CA, after three delays both parties must approve a further delay but Sean said banks routinely file stipulated delays when, in fact, borrowers just want to literally move on.
• There is the well-known tendency of servicers to “lose” paperwork, where borrowers beg for mortgage modifications, short-sales, or deeds-in-lieu. These delay tactics — rather than just answering “no” to a request — make sense in this context because leaving a house in foreclosure limbo, forever, is the only solution that delays the inevitable balance sheet busting write-offs.
• Lastly is the unwillingness of banks to agree to principal reductions, or even modifications with principal balloon payments, which would yield more long-term money than a foreclosure. Servicers appear to want these homes in the higher-yielding default status, even if they are reluctant to actually push the homes to liquidation, to take title on behalf of investors.
We’ve written relentlessly about servicer abuses, but we’ve almost always contextualized these abuses through their effect on borrowers. Staring through data, especially data at this scale, complexity, and with strong economic ramifications, is like looking through a dirty window. But as we wipe away layer after layer of schmutz the picture is becoming clearer. Yes, servicers continue to prey upon ordinary Americans. But evidence suggests that they’re also preying on investors. Individual American families do not deserve to suffer these behaviors, that increase the losses while delaying the uncertainty, and neither do pension funds, European villages, municipalities, or other unsuspecting entities who actually funded these loans.
Few people are going to complain when they’re not paying their mortgage that there is no mark on their credit-report nor a foreclosure; a few of the more perplexed ones — or those that want to bring a bad mortgage to resolution — may speak out, but most remain silent.
Similarly, many investors, and surely the banks themselves, know about these figures. But as both sides spin their wheels, the problem continues to spiral out of control.
Finally, there is government behavior that makes no sense, especially from the Obama Administration. We have repeatedly seen federal intervention when it is inappropriate and unwelcome, and we’ve seen no intervention when it is warranted. For example, the Administration has actively intervened in the multistate Attorney General settlement talks even though this is, by definition, a state issue. However, they have done nothing to prosecute overt and clearly proven interstate crimes surrounding document forgery.
There is a strong argument that campaign donations are at work, but given the lopsided donations from the financial services industry to Republicans one would think Obama would send a message by taking firm control over the FHFA, the FDIC, the SEC, the OCC, the Treasury, the Justice Department, and strong-arming the Federal Reserve into offering substantive help to borrowers and investors. Yet, at every level, the President has failed ordinary Americans. Even the most egregious behavior results in dead silence .. we don’t even get a yawn. Every program has been an unmitigated disaster, especially HAMP. When Administration figures do intervene their influence is overtly skewed in favor of the banks.
Surely Obama and his advisers realize these problems. It seems inevitable that we will soon face either widespread bank failures and a staggering loss in home values (although arguably an increase in middle-class liquidity), or another much larger bailout; a fraud bailout. Either option is likely to sink President Obama’s popularity rating in much the same way it is likely to sink individual home values. Despite this, the president continues to play Kick the Can, presumably hoping these problems won’t be widely recognized prior to the election in November, while the banks continue to kick everybody else.
Market manipulation used to be illegal, especially in cases where there was asymmetrical information or unequal bargaining power. Pundits use the term “heads we win, tails you lose,” but that actually understates the problem because it implies that there still exists individual parties and counter-parties. Our more modern arrangement looks more like an aristocracy, where there isn’t a genuine market at all but rather a pseudo-market operating like a private ancient tax collector, demanding the increasingly poor peasants feed the monarchs and his cronies rather than feeding their own children.

I’m often told that people don’t care about deadbeats who haven’t paid their mortgages. But people fail to realize that this affects everybody. Ordinary Americans see the effects of this manipulation every day; it affects them profoundly, even if they don’t understand it. All but the most irresponsible aristocrats throughout history realized there were boundaries. Their motivations may have differed — some cared about the well-being of the peasantry while others feared the guillotine — but for millennia all but the stupidest acknowledged and avoided pushing the populace too far. If we’re going to live under an American Nuevo-Feudal system, the least we deserve are overlords at least as smart as the despots they’re trying to imitate.

Arthur Brisbane and selective stenography

noreply@blogger.com (Chris) — Sat, 14 Jan 2012 10:32:00 +0000

Arthur Brisbane and selective stenography

TENNESSEE UPDATE: BANK OF AMERICA (INCONSISTENTLY) ADMITS THAT THE NOTE IS OWNED BY A THIRD PARTY AFTER TAKING THE POSITION IN LITIGATION THAT IT DID | Foreclosure Defense Nationwide

noreply@blogger.com (Chris) — Fri, 13 Jan 2012 22:00:00 +0000

TENNESSEE UPDATE: BANK OF AMERICA (INCONSISTENTLY) ADMITS THAT THE NOTE IS OWNED BY A THIRD PARTY AFTER TAKING THE POSITION IN LITIGATION THAT IT DID |

From Foreclosure Defense Nationwide -

We previously advised on this website that in a case pending in the Tennessee Federal Court where the homeowner is represented by Jeff Barnes, Esq. and local counsel John Higgins, Esq. that Defendant Bank of America’s Motion to Dismiss the Plaintiff’s Complaint for Declaratory Relief was denied, as was a subsequent Motion by BOA for the Court to “Reconsider” its denial of BOA’s Motion to Dismiss. The Court determined that BOA had not shown that it owned the Plaintiff’s mortgage loan despite alleging that it purchased the loan in 2005. Defendant BOA took the position that it owned the loan throughout the motion stage of the litigation, with the Motion to Reconsider having been denied on September 29, 2011.
However, just over one month later on November 3, 2011, counsel for Defendant BOA admitted to Plaintiff’s counsel, in an e-mail, that “The Bank of New York Mellon, N.A. is the current holder of the Note.” There was no information, however, as to (a) when Bank of New York came into ownership of the Note; (b) by what manner, means, or vehicle BONY came into ownership of the Note; (c) under what circumstances BONY came into ownership of the Note; or (d) when BOA knew that BONY was the alleged owner of the Note.
The Plaintiff is filing a Motion to amend his Complaint to now add BONY as a Defendant. The Amended Complaint also contains a claim for unjust enrichment to the extent that any payments made to Defendant BOA by Plaintiff which were not legally entitled to be demanded or retained by BOA, and any payments which were transferred to BONY without any authority, be returned to the Plaintiff. The Court in a pending case in California (the Javaheri case) has previously determined that the Plaintiff may state such a cause of action to the extent that any payments made to a third party (who was not the original lender) under circumstances where there was no right for that third party to demand or accept payments from the homeowner gives rise to a claim for unjust enrichment.

Michael Olenick: 9.8 Million Shadow Inventory Says Housing Market is a Long Way From the Bottom « naked capitalism

noreply@blogger.com (Chris) — Fri, 13 Jan 2012 21:50:00 +0000

Michael Olenick: 9.8 Million Shadow Inventory Says Housing Market is a Long Way From the Bottom « naked capitalism If this article is even remotely close to the reality we have a much longer time before we are out of the woods with the housing recovery. People could be just being a house to spend more than renting. Renting right now seems more sensible on a lot of fronts. Factoring in the maintenance costs you can make a plausible argument that buying a house right now might not be a smart investment even when everyone is saying prices have hit rock bottom. Read the article and find out more.

obama and finanical elite in bed together now more than ever

noreply@blogger.com (Chris) — Tue, 10 Jan 2012 21:10:00 +0000

taken from Naked Capitalism website today January 10, 2011. Great article from Bill Black clearly stating more facts regarding the fraudulent administration and how the big money banks are running the government. It is amazing that we are living in such a state that we really can no longer be considered a free market capitalist country and we certainly are no longer a democratic republic. We live under the umbrella of a free society while the government and elites have formed an oligarchy second to none. The oligarchy has masterfully created this system hidden beyond the American Flag so no one really seems to questions the dismantling of our constitution or the pillaging of the American Middle class. I recently watched the movie Margin Call and was repulsed by the portrayal that many of the participants in the mortgage meltdown were actually sympathetic characters, I will give a full review of the movie soon. The movie showed the victims as being a few multi-millionaire wall street workers as the victims. They missed the entire story regarding the failure of the government to protect its citizens and it failed to address the true carnage that took place on main street American that is still leaving a trail of devastation in its wake. This Bill Black article shows more of the reality that the administration and the elected officials care nothing about the common man. They only care to pull the wool over their eyes and get a vote from them so they can get back to living their life as an elite. It is a fraud at its very worst levels.

Bill Black: More Proof of Obama Policy of Covering Up for Elite Financial Criminals

Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from http://neweconomicperspectives.blogspot.com/2011/12/did-ofheo-fix-fannie-and-freddies.html“>New Economic Perspectives.
The New York Times published a column by its leading financial experts, Gretchen Morgenson and Louise Story, on November 22, 2011 which contains a spectacular charge against the Obama administration’s financial regulatory leaders. I have waited for the rebuttal, but it is now clear that the administration does not contest the charge.
The specific example that prompted the NYT article (“Financial Finger-Pointing Turns to Regulators”) was a civil action against a former executive of IndyMac. IndyMac was supposed to be regulated by the Office of Thrift Supervision (OTS). OTS was the worst of the federal financial regulators – which is a large statement. It was so bad that the Dodd-Frank Act killed it. I used to work for OTS. One of the things I did to make myself unemployable during the S&L debacle was to testify before Congress against the head of our agency, Danny Wall, and our head of supervision, Darrell Dochow. Wall resigned in disgrace and Dochow was demoted and sent back to run the obscure office he had once run in Seattle.
Ms. Story and Ms. Morgenson’s column discusses how an IndyMac manager is defending himself against suit by arguing that Dochow told him to file false financial statements. OTS’ senior leaders knew from my book exactly what they were getting when they promoted Dochow and made him the top (anti) regulator for all the top S&L originators of fraudulent liar’s loans.
This column addresses a more general point, the charge that Obama’s financial regulatory leaders actively oppose the prosecution of elite financial criminals and the regulators who conspired with them (to use the term the article quotes Professor Kane as insisting upon).

“Any financial crisis case that named a regulator probably would turn into a huge political battle, because it would question many of the nontransparent acts that bank regulators take while trying to save banks, said Denise Voigt Crawford, former commissioner of the Texas securities board and now a law professor at Texas Tech University.
In any prosecution of bank regulators, she said, “you’d have the Justice Department in a fight with the policy goals of the Department of Treasury. Particularly in this environment, you know the banking regulators would fight it tooth and nail.”
Some longtime lawyers go further and say the overall scarcity of cases related to the financial crisis might be in part because regulators want to avoid scrutiny of their own kind.
“It’s not just one 30-year-old wunderkind who was responsible for the financial crisis,” said Dennis C. Vacco, who was the New York State attorney general in the 1990s and now is a lawyer at Lippes Mathias Wexler & Friedman. “Once you start pulling the string through in these complex cases, you might be surprised what you find at the other end.”
Mr. Vacco continued: “What’s at the end of the string? The defense may be that ‘at the highest echelons of the financial institutions, we were in regular contact with the government.’”

These charges are exceptionally severe. Senior former regulators are willing to be quoted by name asserting that Obama’s (not Bush’s) financial regulatory leaders are blocking lawsuits against fraudulent financial elites and their anti-regulatory co-conspirators because they fear embarrassment. That would be a disgraceful policy. Indeed, it is hard to think of a worse reason for granting the elite white-collar criminals that caused the crisis and the Great Recession immunity from prosecution. The fact that Obama has no response rebutting this grave charge against his administration’s integrity sounds loud, but not proud.

Quelle Surprise! Banks Plan to Fob off Some of the Costs of Multi-State Mortgage Settlement on Investors

noreply@blogger.com (Chris) — Mon, 09 Jan 2012 22:08:00 +0000

Quelle Surprise! Banks Plan to Fob off Some of the Costs of Multi-State Mortgage Settlement on Investors

Rakoff’s Rejection of SEC Settlement with Citi

noreply@blogger.com (Chris) — Wed, 04 Jan 2012 08:57:00 +0000

Detailed and informative article excerpt from SubPrime Shake out Blog

Two days after the release of one of the most scathing judicial opinions in recent memory, the importance of federal Judge Jed Rakoff’s rejection of the SEC’s $285 million settlement with Citigroup is just beginning to sink in. In just 15 pages of moving prose that harken back to Rakoff’s undergraduate degree in English literature, the opinion rips the SEC for its lack of transparency and respect for separation of powers, failure to establish facts or allegations against Citigroup or deter future misconduct, and failure to uphold its obligation to uncover the truth and protect the public at large from financial fraud.

So, what is the gist of Hizzoner’s objections? First off, Judge Rakoff points out that in a parallel complaint filed by the SEC against a Citigroup employee for his role in putting together the CDO at issue, the SEC alleged that 1) Citi created Class V Funding III (the “Fund”) to dump dubious assets on misinformed investors as the market was tanking, 2) Citi helped select and then took a short position in the assets placed in the Fund, and 3) Citi knowingly misrepresented to investors that the assets had been selected by an independent third-party investment adviser in order to place the Fund’s liabilities. Rakoff notes that while these allegations would be tantamount to a showing of knowing and fraudulent intent (the scienter necessary for a fraud claim), the SEC left many of them out of the complaint against Citigroup itself and chose to charge Citi only with negligence (i.e., a failure to exercise due care rather than an intentional lie). That was the first sign of a problem.
Next, Rakoff points out that through its complaint, the SEC seeks to invoke the court’s injunctive powers – an extraordinary remedy – without having proven any facts or coerced an admission of wrongdoing out of Citi. By contrast, the SEC’s settlement with Goldman Sachs over the Abacus CDO required the bank to admit to “a mistake” and to “regrets” that the marketing materials for the CDO were inadequate. This opened the door for civil lawsuits to further deter the bank from misleading investors in the future. With respect to the Fund, the Judge noted that Citi made clear in open court that it was not admitting to the allegations in the complaint and reserved the right to contest the facts in parallel litigation.
Based on this, Rakoff found that the court was unable to determine whether the settlement was “fair, reasonable, adequate, and in the public interest.” (Opinion at 4) In particular, Rakoff held that,

a court, while giving substantial deference to the views of an administrative body vested with authority over a particular area, must still exercise a modicum of independent judgment in determining whether the requested deployment of its injunctive powers will serve, or disserve, the public interest. Anything less would not only violate the constitutional doctrine of separation of powers but would undermine the independence that is the indispensable attribute of the federal judiciary. (Id. at 4-5)

Next, Rakoff takes issue with the size of the penalty imposed on Citigroup and its impact in deterring future misconduct. In one of the more remarkable passages from the Opinion, Rakoff notes that,

a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, especially in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. (Id. at 10)

Rakoff is pointing out in no uncertain terms what Taibbi, filmmaker Charles Feguson, and many in the Occupy movement and elsewhere have been saying for some time – Wall Street continues to look at law enforcement as simply the cost of doing business and will not be deterred from illegal conduct unless the size of the penalties increases dramatically or people start going to jail. Essentially, Rakoff is saying that Wall Street has become accustomed to paying off the SEC when it gets caught.
Rakoff further underscores the inadequacy of the penalties imposed on Citi in this proposed settlement by comparing it to Goldman’s Abacus settlement – which itself has been criticized as inadequate, since it punished Goldman for only one of several CDOs that were marketed in the same manner. Rakoff points out that in the Abacus deal, Goldman only made $15 million in profits (compared to the $160 million in profits for Citi from the Fund deal) and that Goldman’s alleged conduct was arguably less blameworthy as Goldman didn’t directly short the assets in the CDO, but just failed to disclose that Paulson & Co., which had helped select the assets, was also shorting the deal. Yet compared to Citi, Goldman was required to pay a bigger penalty ($535 million as opposed to a $95 million penalty for Citi), admit to certain mistakes, implement broader remedial measures, and cooperate with authorities. (Opinion at 13 n.7). It’s thus not surprising that Rakoff was unable to conclude that the Citi settlement was fair, reasonable, or adequate.
Finally, Rakoff reserves his most biting criticism for the SEC itself in failing to uphold its mandate. After noting that this case “touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives,” Rakoff writes that,

the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances. (Id. at 15)

With that, Judge Rakoff rejects the settlement and orders the parties to prepare for trial on the SEC’s complaint on July 16, 2012.
I was left with chills after reading through the end of this Opinion. It was if I had been waiting for years to hear a member of our judiciary stick out his or her neck to confront the inadequacy of the SEC’s long established “enforcement” patterns – slaps on the wrist, no admissions of guilt and certainly no jail time. Indeed, while the cozy relationship between the SEC and Wall Street (with most at the SEC either having worked on Wall Street or harboring aspirations to work on Wall Street in the future) has been called out repeatedly by journalists, writers and commentators, I had never heard a member of the judiciary stick out his or her neck in such a bold manner and confront the SEC.
But Rakoff’s frequent reference to the core principles of the Constitution and the independent judiciary, as well as his reference to “much of the world, [where] propaganda reigns, and truth is confined to secretive, fearful whispers,” (Opinion at 15) reveal just how important this issue was to the fundamental values that set the United States apart. Still, it took tremendous courage for Rakoff to speak out in the face of pressure from such a powerful government agency and refuse to simply wield his rubber stamp like so many of his peers had done before him. Rakoff is correct – passive judicial acceptance of these sorts of bargains (even between two willing parties) does not protect the public interest one iota. In fact, it does worse, by essentially ending the inquiry and withholding from the public the facts it needs to enforce its rights or recover its losses. As Rakoff points out, there is no guarantee that the money recovered by the S.E.C. by way of such settlements (including the $154 million recovered from J.P. Morgan in connection with the Magnetar deal) will actually go to reimbursing defrauded investors.

read the full article HERE

noreply@blogger.com (Chris) — Wed, 04 Jan 2012 08:31:00 +0000

article from taibblog

Goldman is building an impressive resume of sweepingly bullish predictions that later on, inretrospect, look more like signals to investors that they should run screaming in the opposite direction. A good example might be May of 2008, when Goldman boldly predicted that oil would go to $200 a barrel; oil would go on to peak at $147 less than two months later and crash to the floor soon after.

O'Neill himself famously coined the infamous "BRIC" term (Brazil, Russia, India and China), urging investors to throw their money at those emerging markets, arguing that those markets would eclipse the U.S. and Japan as the world's biggest economies by 2050. Mutual fund investors responded by pouring $70 billion into BRIC over the last decade, but that run looks over now, as $15 billion flowed out of BRIC funds in this past year alone, and some analysts are predicting a $20 percent drop this year.
Even Goldman wrote in a Dec. 7 report that that BRIC has already seen its crest. "We have likely seen the peak in potential growth for the BRICs as a group," Goldman analyst Dominic Wilson wrote in the Dec. 7 report.
I laughed when I read Wilson's quote, wondering exactly how long ago the bank privately came to that conclusion and started shorting BRIC countries. Goldman's Dec. 7 report, incidentally, arrived just before O'Neill released his new book, a Tom Friedmanesque volume of cheerleading nonsense called The Growth Map: Economic Opportunity in the BRICs and Beyond. That book was published on December 8, meaning O'Neill was seen spending 256 pages predicting "rosy prospects" for the BRIC bloc exactly one day after Goldman itself had officially bailed on its own cheesy marketing gimmick.
Anyway, every time I read one of these rah-rah predictions, I get this feeling that I've seen this movie before. When it comes time to do Goldman, Sachs: The Movie!, I'll be bummed beyond belief if Vin Diesel doesn't get to play Jim O'Neill.
The folks at Zero Hedge long ago caught on to Goldman's JT-Marlin pump-and-dump vibe. Here's what they said when Goldman upgraded European bank stocks a few weeks ago:

Happy New Year, everyone. Hope you all had a great holiday...
Have a column on Iowa coming soon, but first, a quick but absurd note from the world of high finance.
It seems Jim O'Neill, the head of Goldman's Asset Management department, is predicting that the United States stock market may go up "15 to 20 percent." O'Neill apparently believes Ben Bernanke and the Federal Reserve will resort to another round of money-printing, and finally green-light the long-awaited "Qe3," or third round of "Quantitative Easing."
The QE programs involve the Fed printing hundreds of billions of dollars and pumping them into the marketplace, where they ostensibly stimulate the economy (although recent experience tells us that the money mostly ends up being swallowed by the financial services industry – but that's another subject for another time). Anyway, Bernanke declined to go ahead with a third QE program in late 2011, but O'Neill apparently thinks we'll get it in 2012. From Bloomberg:

"If QE2 doesn’t work, then we’ll get QE3," said O’Neill, who was named chairman of the money manager in September after working as the co-head of global economics research and chief currency economist at New York-based Goldman Sachs Group Inc. since 1995. There’s a "good chance" the S&P 500 will rise 15 percent to 20 percent in the next 12 months, he said.

O'Neill added that he thought a 20 percent bump would be "relatively straightforward" for the U.S. S&P.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/goldmans-latest-boiler-room-stock-america-20120102#ixzz1iTaNXnRi

Goldman has just started selling European bank stocks to its clients, whom it is telling to buy European bank stocks. Said otherwise, the Stolpering of clients gullible enough to do what Goldman says and not does, has recommenced. Our advice, as always, do what Goldman's flow desk is doing as it begins to unload inventory of bank stocks. Translation: run from European bank exposure.

Sure enough, Euro bank stocks plummeted a few days after that ZH post.
I don't know much about the stock market, but when the O'Neills of the world start telling me what a great investment opportunity the American stock market is, I start getting the urge to buy canned food ...

Read more: http://www.rollingstone.com/politics/blogs/taibblog/goldmans-latest-boiler-room-stock-america-20120102#ixzz1iTa7GAdP

Win for MBIA in Ruling Against Countrywide (Updated: Maybe Not Really) « naked capitalism

noreply@blogger.com (Chris) — Wed, 04 Jan 2012 05:18:00 +0000

Win for MBIA in Ruling Against Countrywide (Updated: Maybe Not Really) « naked capitalism

The Home Equity Theft Reporter Cases & Articles: Utah Federal Court Rulings On Unqualified BofA Foreclosure Trustee In Conflict

noreply@blogger.com (Chris) — Thu, 29 Dec 2011 09:00:00 +0000

The Home Equity Theft Reporter Cases & Articles: Utah Federal Court Rulings On Unqualified BofA Foreclosure Trustee In Conflict

BofA's Countrywide to pay $335 million over bias case | Reuters

noreply@blogger.com (Chris) — Thu, 29 Dec 2011 08:53:00 +0000

BofA's Countrywide to pay $335 million over bias case | Reuters

Appeals court to review BofA $8.5 billion MBS pact | Reuters

noreply@blogger.com (Chris) — Thu, 29 Dec 2011 08:50:00 +0000

Appeals court to review BofA $8.5 billion MBS pact | Reuters

Protesters Worldwide Demand An End to Crony Capitalism - Washington's Blog

noreply@blogger.com (Chris) — Thu, 29 Dec 2011 07:12:00 +0000

Protesters Worldwide Demand An End to Crony Capitalism - Washington's Blog

Protesters Worldwide Demand An End to Crony Capitalism

Posted on December 27, 2011 by WashingtonsBlog

People All Over the World Are Rising Up Against Crony Capitalism

Modern American conservatives and liberals both passionately hate crony capitalism – the malignant symbiotic relationship between governmental leaders and their cronies.

The Boston Tea Party in 1773 was largely a protest against crony capitalism.

Remember, it’s not just Western governments which fall prey to crony capitalism. (For example, Egypt’s Mubarak family raked in between U.S. $40 and $70 billion dollars through cronyism.) Indeed, people all over the world are starting to demand an end to crony corruption.

As Reuters global editor at large Chrystia Freeland noted yesterday, the global protests are really protests against crony capitalism:

Across the globe, this was a year when people took to the streets, often overthrowing their leaders in the process. That was true in the Arab world, in Russia, in India, in Western Europe, in the United States and even in China.

***

The unifying complaint is crony capitalism. That’s a broad term, to be sure, and its bloody Libyan manifestation bears little resemblance to complaints about the Troubled Asset Relief Programin the United States or allegations of corrupt auctions for telecommunications licenses in India. But the notion that the rules of the economic game are rigged to benefit the elites at the expense of the middle class has had remarkable resonance this year around the world and across the political spectrum. Could the failure of the experts to anticipate this anger be connected to the fact that the analysts are usually part of the 1 percent, or at least the 10 percent, at the top?

***

As for crony capitalism, this slogan of the street is both a challenge for the state and an opportunity. For some regimes, of course, crony capitalism, with a side order of repression, is the only dish on the menu. For them, the trends of 2011 do not bode well.

But most of today’s troubled market democracies don’t need a revolution to sweep away their cronies. What they do need is a new version of capitalism, designed for the 21st century. That is what the world’s protesters, in their different ways, are all asking for. Here’s hoping that 2012 provides some politicians with some answers.

Note: Don’t get confused by the word “capitalism” in the phrase “crony capitalism”. Crony capitalism is not at all free market capitalism. Instead, it is actually the same thing as fascism, communist style socialism, kleptocracy, oligarchy or banana republic style corruption.

Bill Black: What if the SEC investigated Banks the way it is investigating Mutual Funds? « naked capitalism

noreply@blogger.com (Chris) — Thu, 29 Dec 2011 07:02:00 +0000

Interesting article by Bill Black published at Naked Capitalism.

The Wall Street Journal ran a story yesterday (12/27/11) entitled “SEC Ups Its Game to Identify Rogue Firms.” “Rogue” is an interesting word with a range of definitions. When it is used as an adjective its meaning is: “a playfully mischievous person; scamp.” The trivialization of the most destructive elite frauds is one of the most common forms of what criminologists call “neutralization” of the moral content of wrong doing. Neutralization increases crime.The actual story makes it clear that the criminals that the SEC was identifying were not “rogues.” They were the CEOs of seemingly legitimate firms. The SEC is identifying “accounting control frauds” – the frauds that cause greater financial losses than all other forms of property crime combined. The SEC is not identifying a few rotten apples, but roughly 100 hedge funds likely to have engaged in accounting fraud. The WSJ describes the SEC’s identification system:

read the full article by following the link below.

Bill Black: What if the SEC investigated Banks the way it is investigating Mutual Funds? « naked capitalism

The Home Equity Theft Reporter Cases & Articles: Utah AG Files Criminal Theft, Racketeering, Communications Fraud Charges Against Owner Of Loan Modification Ripoff Shop

noreply@blogger.com (Chris) — Tue, 27 Dec 2011 18:42:00 +0000

The Home Equity Theft Reporter Cases & Articles: Utah AG Files Criminal Theft, Racketeering, Communications Fraud Charges Against Owner Of Loan Modification Ripoff Shop

Federal Home Loan Bank Litigation Update: MBS Cases Moving Slowly, But Steadily, Ahead for FHLBs | The Subprime Shakeout

noreply@blogger.com (Chris) — Tue, 27 Dec 2011 18:39:00 +0000

Federal Home Loan Bank Litigation Update: MBS Cases Moving Slowly, But Steadily, Ahead for FHLBs | The Subprime Shakeout

more government and bank scham with occ foreclosure review

noreply@blogger.com (Chris) — Tue, 27 Dec 2011 18:36:00 +0000

From Naked Capitalism.
Interesting story about the continued bank friendly government programs that are really just ways to help the bank image and for politicians to look as though they are doing something. The reality is that the banks and servicers are screwing homeowners and over charging while not applying funds to payments to make people fall further behind. THE BANKS STOP APPLYING FUND TO MORTGAGE IF YOU FALL BEHIND SO THEY CAN SEND YOU NOTICES SAYING YOU ARE FARTHER BEHIND THAN YOU ARE AS THEY HOLD FUNDS IN SUSPENSE EVEN IF IT IS A FULL MONTHS PAYMENT. THEN THEY WILL NOT ACCEPT ANY FUNDS AT THEIR BANKS AND EXPECT IT TO BE SENT OVER NIGHT TO THEIR SERVICE CENTER. CASH IS NOT ACCEPTED AT BANK LOCATIONS.
IS THAT HOW TO HELP HOMEOWNERS OR TO IMPROVE THE SYSTEM. NO IT IS JUST A SCAM TO MAKE MORE MONEY FOR BANKS AND FOR POLITICIANS TO SIT ON THEIR ASS DOING NOTHING.

Morgenson on the Sham of the OCC’s Foreclosure Reviews

Given that the ~~Office of Bank Boosterism~~ Office of the Comptroller of the Currency is the clear first among the highly competitive ranks of bank-friendly regulators, the fact that the OCC launched a program for borrowers to obtain restitution for financial harm suffered due to foreclosures seemed more than a bit sus.
Gretchen Morgenson does an admirable job of exposing the multiple shortcomings of this OCC program. She quotes Alys Cohen of the National Consumer Law Center, who nails it: “Not only will it not help people, it could easily harm them.”
This is yet another Obama Administration “pretend we are helping ordinary citizens when we are in fact helping the banks” scheme. The most damning tidbit comes late in the article, that borrowers may (I’d assume will) be asked to sign releases that are far broader than the matters under examination. In other words, to get whatever relief the OCC provides, borrowers may unwittingly give up rights worth far more:

For example, participants in line to get remuneration may be asked to give up their rights to defend themselves if they get into financial trouble again.
“This process is not meant to fix the original lending practices, so people need to hang on to their right to challenge the original loan later,” she [Cohen] said.
Morgenson’s account depicts several shortcomings. The banks hire “independent” auditors of their practices, and Morgenson identifies two that look compromised (including one flagged by Michael Olenick on this site). And why, pray tell, isn’t the OCC conducting these reviews? Similarly, the review covers only 2009 and 2010, when many subprime borrowers hit the wall earlier. It’s pretty clear that this process, like the bogus Foreclosure Task Force (which reviewed 2800 loan files and did no validation of the data in those files) is designed to give servicers a clean bill of health, with only some problems that will be deemed to be minor and on their way to being remedied.

What is more than a little frustrating is that this regulatory-initiative-as-coverup is SO predictable, yet so few journalists treat these programs with the skepticism and derision they deserve. We can only hope that one of the perverse benefits of the protracted housing recession will be that media and public complacency erodes.

The King of All Vegas Real Estate Scams - Businessweek

noreply@blogger.com (Chris) — Wed, 14 Dec 2011 09:32:00 +0000

The King of All Vegas Real Estate Scams - Businessweek Make big money in penny stocks today